China fails to quell stormy start to 2016

Tuesday, January 05, 2016 - 01:38

China struggled to shore up shaky sentiment a day after its indexes and yuan currency tumbled, rattling markets worldwide. And as Sonia Legg reports, analysts are warning investors to buckle up for more wild price swings in the months ahead.

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China's central bank was ready this time - as soon as stocks started falling they dealt a trump card, pouring nearly $20 billion into money markets.
It was the largest cash injection since September.
Traders also suspect they used state banks to prop up the yuan.
It was also hit when manufacturing data disappointed on Monday, something we may have to get used to says Darren Sinden from Admiral Markets
(SOUNDBITE) (English): DARREN SINDEN, MARKET COMMENTATOR, ADMIRAL MARKETS, SAYING:
"The truth is as the year progresses we will find out the reality of the situation in China. We have been bearish about China's growth for the last year or so - we think it's only about half the current headline rate the PBOC and the authorities in Beijing have put out so more volatility ahead."
China's authorities also announced plans to further restrict share sales by major stakeholders in listed companies.
And tweak a circuit breaker mechanism that some say fuelled Monday's sell-off.
European shares responded positively until U.S. futures looked set to rock Wall Street
Fidel Helmer is from Germany's Hauck and Aufhaeuser.
(SOUNDBITE) (German) CAPITAL MARKETS EXPERT AT HAUCK & AUFHAEUSER PRIVATE BANK, FIDEL HELMER, SAYING:
"I think this crisis will keep us in check for the whole of 2016, but I also think the stock exchange will quickly adjust and put our own economic activity and business news forward."
China now faces a similar dilemma to the U.S. Federal Reserve after its recent tapering of its stimulus program.
It must unwind an unprecedented stock market rescue while pressing ahead with reforms.
Its approach so far has been too heavy handed for some - and volatility could be the norm for some time to come.

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